Question

A portfolio consists of three stocks. There are 540 shares of Stock A valued at $24.20 share, 310 shares of Stock B valued at $48.10 a share, and 200 shares of Stock C priced at $26.50 a share. Stocks A, B, and C are expected to return 8.3 percent, 16.4 percent, and 11.7 percent, respectively. What is the expected return on this portfolio

Answer 1

Answer: 12.47%

Step-by-step explanation:

The value of each stock will be gotten by their unit multiplied by the price.

Value of Stock A = 540 × 24 2 = 13068

Value of stock B = 310 × 48.1 = 14911

Value of stock C = 200 × 26.5 = 5300

Total value of stock = 33279

Weight of stock A = 13068 / 33279 = 0.393

Weight of stock B = 14911 / 33279 = 0.448

Weight of stock C = 5300 / 33279 = 0.159

The expected return on this portfolio will then be:

= (0.393 × 8.3) + (0.448 × 16.4) + (0.159 × 11.7)

= 12.47%